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Ascena In The Process Of Acquiring Ann Taylor

May 21, 2015 | About:

Another one is getting added to Ascena’s portfolio of women apparel brands as it decides to buy Ann Taylor for about $2.16 billion. The downgrading business of Ann is expected to soar under its new parent.

The American retailer of women’s clothing, Ascena Retail Group Inc. (NASDAQ:ASNA), present in market as Dressbarn is going to buy New York-based Ann Inc. (ANN) for about $2.16 billion in a cash-and-stock deal. The deal will be an add-on to the already strong portfolio of Ascena, which owns Dressbarn and Lane Bryant brands. Ascena saw just a slight change in its stocks at $14.22 while Ann’s stocks saw a huge jump of 20% to close at $46.28.

The deal

Headquartered in New Jersey, Ascena retail group Inc. was founded in 1962 and specializes in clothing for working women and plus size women. It has multiple brands present in the market including Dressbarn, Catherines, Maurices and Justice along with Lane Bryant. On the other hand, Ann Taylor is an American group of specialty apparel retail chain store for women, which is present in the market under Ann Taylor, LOFT, Ann Taylor factory and LOFT outlet brands. The deal took place between the two at the time when Ascena is struggling to get hold of one of the top spots in the market while Ann Taylor is trying hard to stay profitable.

As per the deal, Ascena has set $47 per share as the cash and stock price along with a premium of 21%. The deal will end up making Ascena and Ann together as one of the largest sellers of women clothing which the both had been aiming since long. The expected stores will reach a mark of 4900 with sales as much as $7.3 billion post the deal. In 2012, Ascena had struck a deal for Charming Shoppes Inc. worth $900 million to get associated with Lane Bryant chain.

Plight of the two

Going by the weaker retail industry trends in the U.S., Ann couldn’t get spared, either, and faced a lot of difficulties in keeping the growth and sales volumes steady. The market trend of enormous discounts and increasing competition has led to a position where Ann had to enter the deal to keep up with the growing market. The company’s belief in its Ann Taylor and Loft brands is still intact, and it is even banking upon these to take the parent company forward while Ann continues to focus on its quality.

Ascena has no different story as it struggles to stay ahead in a market where companies like J. Crew’s Mickey Drexler and L Brands’ Les Wexner have a strong presence. Moreover, single brand companies had been dominating the market while multi-branded companies like Ascena are looking for innovative strategies.

Benefits to Ascena

Ascena started as a small company selling clothing for the working- women, a trend which was gaining at that time. Gradually, it developed and expanded to begin trading as well and finally got listed in 2011. The company has been working since long to set up an system which allows cost cutting on back-end operations including sourcing and distribution so as to make its brands grow better than before. Under this, the company was able to outline a cost cut worth $150 million in annual costs by imbibing some of the tried and tested strategies of Ann in its own business model. This will begin by 2018. Ann’s online portal will also reap benefit for Ascena as the former’s sales through ecommerce account for 20% of its total sales, which is also interestingly higher than total esales of Ascena.

About the author:

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